A New Year And Two Predictions For The Industry

The New Year's Eve ball has dropped, and 2006 is here. As everyone else celebrated on Dec. 31, our family was enjoying our own New Year's Eve tradition. My family and friends get together and we all write down our predictions of the coming year for each other. Then, we lock those predictions away until the following year's celebration.

When we pulled out the envelopes to read last year's predictions, my crystal ball told me to predict my mother-in-law would move closer to her firstborn son. Wouldn't you know it? She's packed it up and moved a couple of blocks from her precious golden boy.

Now, riding that psychic wave, I think I'm ready to make a couple of predictions for the year ahead in the HVAC industry.

PREDICTION #1

It's going to be a prosperous year for the HVAC elite.

Due to the changes on the horizon as HVAC moves into the 13 SEER mandate, it's going to be a prosperous year.

Many contractors today don't know how to truly sell their services. Their technicians have been selling systems based on the idea of replace versus repair. As the prices of 13 SEER systems rise, it's going to be tougher and tougher for these technicians to justify the cost of replacement. Since most of these companies also have untrained salespeople, they don't know how to properly sell their systems and their company.

As a result, they wind up selling on price alone. I believe that even though contractors are going to be paying more for the new 13 SEER equipment, they won't be adjusting their price percentages accordingly. They'll start off the year selling 13 SEER systems for a price similar to what they had been selling the lower SEER units.

At the same time, I'm willing to bet that there are a number of companies who have used their cash flow to stock up on 12 SEER equipment from suppliers. That'll probably be a good decision, especially in the climates where it doesn't get as hot.

Many of my AirTime 500 members are already seeing tremendous success with our "anti-13 SEER" marketing campaign. Some of those individuals were able to gain a large share of below 13 SEER units and will be able to sell those units for quite some time.

When other contractors try to compete, they'll be paying the new 13 SEER prices without keeping their percentages where they need to be. They'll try to stay in line with the savvy company offering its stock of 10 or 12 SEER equipment, and I think that will ultimately drive the costs of 13 SEER equipment down for the unsophisticated contractor that hasn't learned to build value.

Without truly professional salespeople who know how to communicate with consumers and emphasize the value of the company, proper installation, 24-hour service, warranties and guarantees, etc., unsophisticated HVAC companies will be forced into the commodity role.

I think there are going to be a lot of companies driving the costs of HVAC prices down, so if you thought prices were too low this year, wait and see what they are next year. Some of you will be paying 30 percent to 40 percent more for equipment while selling it for only 10 percent to 20 percent more.

After giving this doom and gloom forecast, why would I predict a year of prosperity? I remember the year in the California real estate market when prices were overinflated. When that bubble burst, many people lost 50 percent to 60 percent of their home's value overnight. People that were in a position to acquire real estate became wealthy. That's what I see happening in the HVAC world.

As more and more companies struggle to make profits in 2006, I think a tremendous opportunity will be created for the highly skilled, professionally trained organizations to create value and set themselves apart. These organizations are set for a year of prosperity because when less sophisticated contractors struggle, many have to close up and go out of business. This creates a great opportunity for the well-prepared company.

From working with successful contractors, I know it's during times of high interest rates, recession, and economic downturns when successful individuals not only survive but also thrive. While others complain about how tough things are, these opportunists realize this is the key to their future. These successful few are the ones that grow by leaps and bounds, acquiring customers as the lesser skilled business owner closes up shop. To prosper in 2006, you'll need to be one of these highly skilled contractors.

PREDICTION #2

It's going to be a great recruiting year.

As more of these companies close up shop, there will be a supply of technically sound employees flooding the market. That means it's a great time to bring these technical superstars to your team.

They're probably tired of lying awake at night worrying about making payroll and fighting the constant battle. They may welcome the opportunity to just run service calls and serve clients. They'll probably bring their client base along with them. What a great opportunity. Hire a great technician and gain a customer base. That's the way to make money every day.

So, as you look in the mirror, what kind of year are you going to have? Will you complain about how tough things are, or are you going to realize you are the key to your future and commit to success? Make your predictions and seal your envelopes, and on the eve of 2007, we'll see whose predictions came true.

Terry Nicholson is president of AirTime 500. For more information on AirTime 500, call 800-505-8885. Nicholson can be reached by e-mail at tnicholson@venvestinc.com.

Publication date: 01/23/2006

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